Of course suppose it really did stop WWIII, how could we know? Arguments like this are simply exercises in counter-factual history and their merits have to be judged on how plausible they really seem (barring the discovery of a multi-verse telescope or massive computer simulator, there’s no way to run the last 65 yrs or so without the Vietnam War to see how things would turn out).

Well, how plausible is it that intervention saved us from another Great Depression? Given that virtually every indicator has been worse than what Obama’s Best and Brightest told us was the worst case if we did nothing, I don’t think the counter-factual is looking too bad.

It is likely that Obama’s administration has done nothing but prolong the pain. Far from stopping another Great Depression, intervention only spooked the markets and put off recovery.

That’s pretty easy to field. It was assumed this recession would look like previous recessions when instead it was a mega-recession. A bit like a fire dispatcher assuming a call is for a typical 1 alarm fire when in fact it’s a 5 alarm fire.

Would fighting the fire reduce it from what it would have otherwise been? Of course. Would the dispatcher’s ‘estimate’ of how long it would take to stop the fire and how bad it’s damage would be be way off? Of course.

So you’re saying all their data and their models were wrong? They completely failed to understand the scope of the recession? Because their grasp of the underlying science and basic facts were poor?

How do you think this is helping your argument?

If they have no idea what the disease is, or at least no idea about its scale and scope, how on Earth could they be right about the cure?

At best what you mean is that their response was utterly limp and weak. They gave a Level 1 response to a Level 5 disaster. Which makes you wonder what an appropriate response would have been. Either way their cure did not help and we are back with the counter-factual – Obama’s hugely expensive waste of money did not stave off anything.

Drezner does not believe in Creative Destruction, aka Schumpeter’s gale. He believes in Keynesianism, which preserves the status quo and “works” in the same way a medically induced coma works to save a patient’s life. It does save the life, but sometimes it’s better to let the old person die in peace and see their grandkids grow. That’s the main real difference between Keynesians and Austrians.

I’m not sure why the two are at odds with each other. If you entered the last recession on a deeply underwater mortgage have you really been shielded from destruction? On the other hand if you entered the recession with very little debt the recession was probably a great opportunity for you.

Keeping demand from collapsing allows the creative side of ‘creative destruction’ to flourish. Simply seeing destruction accomplished is not helpful.

@Boonton–supporting demand from collapsing can, say the Austrians, have negative consequences since it prevents people from retooling for new jobs. So those hamburger flippers cannot retrain to become brain surgeons, since artificial demand keeps them at their dead-end jobs. In practice, I am a bit skeptical that the Austrians are right, because it takes decades to retrain somebody, especially your average American used to being mollycoddled by the nanny state.